@musictechsolve: How to Fix The Music Modernization Act’s Flawed “Audit” Clause — Music Tech Solutions

By Chris Castle (crosspost from MusicTech.Solutions)

Доверяй, но проверяй

The famous old Russian proverb reminds us to trust but verify.  That’s been the story in the record business since the cylindrical disc.   All the “modernization” in the world will not soothe songwriter’s genetic suspicion of their accounting statements.

The collective to be established by the Music Modernization Act (“MMA”) undertakes the obligation to handle other people’s money.  It quickly follows that those whose money the collective handles need to be able to verify their royalty payments from time to time.  This has been an absolutely standard part of every royalty-based agreement in the music business for a good 50 years if not longer.

But like every aspect of the MMA, one has to always remember that while all songwriters may be equal, some songwriters are more equal than others.  The MMA creates a two tier system–those who opt out of the compulsory blanket license by the mutual agreement of a rights owner and a digital service in the form of a voluntary agreement and those who do not.  Those who do not have this opt-out right appear to receive payment directly from the collective instead of directly from the service–adding another set of hands and transaction costs.  (It must be said that this group receiving payment under the compulsory blanket license will presumably also include those who currently have a voluntary license with digital services that is not renewed it in future.)

The collective undertakes the responsibility of accounting should anticipate concerns of songwriters regarding verifying the accuracy of the statements and payments it renders.  However, the MMA provides no supervisory oversight and in my view has a rather punitive black box clause that allows “unmatched” royalties to be paid on a market share basis to publishers, and then on to their lucky songwriters pro rata.  This suggests that everyone who is in that lucky songwriter’s chain, like managers, business managers and lawyers working on a percentage basis may also get a share of these black box distributions in compensation.

So on the face of it, the MMA creates a relatively large category of people who have an economic interest in the black box.  You can be cynical and think that they have an interest in the black box being as large as possible (meaning the accounting controls are as weak as possible), or you can agree with five-time Grammy winner Maria Schneider that if the “lucky” songwriters actually knew that they were being paid with money that belonged to the “unlucky” songwriters, they would be angry about that unfairness.  Emphasis on the “actually knew”.

Or you could say, let’s not go either direction–let’s set up transparency and controls so that the incentives are properly aligned to create the smallest black box possible.  No publisher needs the writer-relations headache of suspicious minds, and the collective should do what it can to be above reproach.  Here are a couple solutions to increase the trust level:  Add oversight of the collective by the Office of the Inspector General (as a quasi-governmental organand at least  designated by the Copyright Office and operating under the control of the Copyright Office, and also tighten up the audit clauses in the MMA to treat songwriters auditing the collective the same as the collective is treated by the digital services.

The Inspector General

One way to make sure that the collective–a quasi governmental organization in my view–is run honestly is to make it subject to oversight review by one of the U.S. Government’s many Inspectors General.  Rick Carnes of the Songwriters Guild of America suggested this to Rep. Doug Collins at the University of Georgia Artist Rights Symposium in a question from the floor.

For example, the Library of Congress (currently where the Copyright Office is housed) has an Inspector General.  Since the Copyright Office has a lot to do with the creation and periodic review of the collective, they could save themselves a bunch of Freedom of Information Act requests from angry songwriters by having an Inspector General  review the collective annually (or better yet, in real time).

My understanding is that giving an IG jurisdiction over the collective will require some enabling legislation, but I think it’s something well worth looking into.  It would give the songwriters of the world a true-blue fiduciary to represent their interests as well as comfort that they had a line of appeal with some teeth short of expensive litigation.


The Inspector General is not in the current draft of the MMA, but audits are–both audits of the collective by songwriters and audits by the collective of digital music services.  We’ll focus on audits of the collective in this post.  It should be said that under the current compulsory license now in effect (i.e., pre-MMA), songwriters get no audit right, so the fact that there is an audit right at all is an incremental improvement.

Unfortunately, the MMA’s audit right still keeps songwriters away from auditing the right party–the digital services–and keeps that upstream data away from them.  Plus, all audits under MMA appear to be subject to confidential treatment.  I don’t think there’s a good reason to keep these secret.  If a smart auditor finds a flaw in the collective’s accounting systems, that flaw should be disclosed and there should be an automatic true up of everyone affected.

But first, let’s realize what an “audit” actually is.  It is a term of art in the music business and really means a “royalty compliance examination” which is solely focused on making sure that statements and payments rendered conform to the contract concerned, or in this case, the statutory requirements of the compulsory blanket license.

(It also must be said that as Maria notes, the MMA specifically exempts the collective from any responsibility for incompetent royalty accounting other than “gross negligence”, which usually means blatant indifference to a legal duty or something along those lines–assuming the collective’s board or employees actually have a legal duty to account correctly which it may not.)

The person conducting a royalty audit is typically not a certified public accountant as there is nothing about conducting this examination that requires a knowledge of Generally Accepted Accounting Principles (“GAAP”), financial accounting, or Sarbannes Oxley compliance.  It is, in fact, quite rare for a royalty audit to be conducted by a CPA, and I’ve even had lawyers conduct an audit because the analysis involved is mostly that of contractual, or statutory, interpretation.  Analysis of music industry-specific contracts is typically not part of the training of CPAs.  So even if an auditor is a CPA, the skills needed to conduct the audit are typically learned through on the job training.

What is very common, however, is for someone on the receiving end of the audit to try to require the auditor be a CPA, arguably to increase the cost of the audit on the person owed money.  CPAs often bill at higher rates than do royalty auditors, which creates a disincentive for audits.  What is also common is for lawyers to think that every time they draft a clause about anyone conducting anything having to do with accounting, that they need to limit the person doing that examination to a CPA, because…well, because…  This is what I call stupid lawyer tricks, and the CPA requirement is something that is routinely negotiated away in record deals and publishing deals if you have an ounce of leverage.

Here’s the preamble of the MMA’s audit clause for audits of the collective:’

A copyright owner entitled to receive payments of royalties for covered activities from the mechanical licensing collective may, individually or with other copyright owners, conduct an audit of the mechanical licensing collective to verify the accuracy of royalty payments and distributions by the mechanical licensing collective to such copyright owner

Remember–copyright owners under the compulsory are not allowed to audit the service, although the collective may audit the service.  (And, of course, voluntary agreements are governed by their terms regarding audits and are not subject to the compulsory.)

Limiting the audit right to “copyright owners entitled to receive payments” means that if songwriters have an administration or co-publishing agreement, they will probably not be able to conduct an audit of the collective (even if their administrator or co-publisher is a board member of the collective).  Because the audit is limited to “verifying the accuracy” of prior payments, the audit of the collective will not be able to look “upstream” to the service making the payment and may not be able to look at payments made to the collective, just the payments by the collective.

The audit shall be conducted by a qualified auditor, who shall perform the audit during the ordinary course of business by examining the books, records and systems of the mechanical licensing collective, as well as underlying data, according to generally accepted auditing standards and subject to applicable confidentiality requirements prescribed by the Register of Copyrights…

Sounds good, right?  A “qualified auditor” is a defined term, however:

QUALIFIED AUDITOR.—The term ‘qualified auditor’ means an independent, certified public accountant with experience performing music royalty audits.

Again, I don’t think that the auditor needs to be both a CPA and have experience.  Experience is enough.  For example, if the auditor has performed audits for members of the collective’s board of directors, perhaps that would be enough.

The qualified auditor shall determine the accuracy of royalty payments, including whether an underpayment or overpayment of royalties was made by the mechanical licensing collective to the auditing copyright owner(s); provided, however, that before providing a final audit report to such copyright owner(s), the qualified auditor shall provide a tentative draft of the report to the mechanical licensing collective and allow the mechanical licensing collective a reasonable opportunity to respond to the findings, including by clarifying issues and correcting factual errors.

This clause is a problem.  First, the auditor is hired–and has a professional duty–to find underpayments of royalties.  That’s what they look for.  The auditor does not have a duty to do the collective’s work for it and find overpayments.  The auditor is not hired to find overpayments, they are hired to find underpayments.

The collective should hire its own accountants to review its royalty statements, and it surely will do so if it gets an audit notice.  Otherwise the US Government is placing a heavy burden on the auditor and the copyright owners to look for overpayments as though the auditor played the role of a public financial accounting firm looking for accuracy on behalf of stockholders.

Plus, the requirement to force that auditor to give the collective the audit report before giving it to the people who hired that auditor is a bit much.  Fair enough to meet and confer at the work paper stage to make sure there weren’t inaccuracies in the analysis, but that should not place any prohibition on whether the auditor’s own client can see the report first.

If this is really the role that the Government wants the auditor to play, then by all means let’s make any miscalculations by the collective available to the public and publish them in the Federal Register.  Let’s not have the auditor’s findings subject to any confidential treatment.  If that brings down a host of other audits or a need to restate millions of royalty payments, then so be it.  Because we are not just looking for underpayments we are searching for the truth, right?

I don’t think so.  And the next part of the audit clause shows why:

The auditing copyright owner(s) shall bear the cost of the audit. In case of an underpayment to the copyright owner(s), the mechanical licensing collective shall pay the amounts of any such underpayment to the auditing copyright owner(s), as appropriate. In case of an overpayment by the mechanical licensing collective, the mechanical licensing collective may debit the accounts of the auditing copyright owner(s) for such overpaid amounts, or such owner(s) shall refund overpaid amounts to the mechanical licensing collective, as appropriate.

Like so many other parts of the MMA, this is essentially an “ad terrorem” clause, or a right coupled with a penalty if it is exercised.  What I think this means is that regardless of how much the underpayment might be–including both a material and nonmaterial amount–the songwriter bears 100% of the cost of the audit.  The songwriter’s auditor has to look for overpayments (and bill their client for that extra review), and if the auditor finds any, the auditor has to report the overpayment.  The songwriter then not only has to repay that amount (whatever “as appropriate” means), but also pay for the expense of finding it.

Compare this to the rights of the collective when auditing a digital music service:

The mechanical licensing collective shall pay the cost of the audit, unless the qualified auditor determines that there was an underpayment by the digital music provider of 10 percent or more, in which case the digital music provider shall bear the reasonable costs of the audit, in addition to paying the amount of any underpayment to the mechanical licensing collective. In case of an overpayment by the digital music provider, the mechanical licensing collective shall provide a credit to the digital music provider.

So what’s good for the goose is not good for the gander.  When the collective is auditing upstream, the collective gets the benefit of that standard underpayment penalty.  That means that the service has to pay for the cost of the audit if the underpayment exceeds a fixed percentage, in this case 10%.  If there is an overpayment, the collective never has to repay the overpayment, just credit the account with an offsetting amount.

There should be no obligation on the part of the songwriter to have to find overpayments and if an overpayment is found in the normal course, it should simply be credited (which is the effect of the collective’s audit clause on songwriters downstream).

Songwriters should get the same underpayment protection on audit costs that the collective enjoys.

Appointing an Inspector General and cleaning up the audit clause would certainly make the MMA more fair for songwriters than it currently is.

Video: Who You Gonna Call? Artists’ Rights And Law Enforcement Panel UGA Artists Rights Symposium Jan 23

Who you Gonna Call? Law Enforcement and Artists’ Rights


Amanda Williams, Songwriter, Songwriter Advocate
Detective Superintendent Peter Ratcliffe, Police IP Crime Unit City of London Police
Carlos Linares, VP Anti-Piracy Legal Affairs RIAA
Ellen Seidler, Filmmaker, Writer, Producer, Digital Citizens Alliance
Kevin Phelan,  Senior Supervisory Agent, FBI Palo Alto CA

1:15- 2:15 PM

Chris Castle of MusicTech Policy once remarked, “If someone is stealing your musical gear, it’s clear you call the police. If someone is stealing your musical catalogue, who do you call?” Most of the time the answer is “call a lawyer and file a federal copyright infringement lawsuit.” However, this presents several problems. An artist would have to track down the culprit, not an easy task when operators of website may be located in foreign countries or ownership masked by shell registrations. Second, a plaintiff must have hundreds of thousands of dollars to proceed in federal court. This is not a practical solution for most independent songwriters and musicians.

There are however other actions that artists may initiate. The federal government has several units that deal with criminal intellectual property theft that can often help. In addition, it’s entirely possible that these websites may be committing other crimes such as fraud, tax evasion and/or money laundering. Other federal units may be activated to investigate these suspicions. Similarly, these crimes may also violate state laws. Many states also have their own copyright laws, rights of publicity, false advertising and consumer protection statutes that may come into play. Some of the most surprising and effective anti-piracy law enforcement operations in recent years have come from the City of London’s Police Intellectual Property Crime Unit. Is it possible an artist in the US could one day call the local police?

Video: Grassroots Advocacy Panel at University of Georgia Terry College Artists Rights Symposium Jan 23 2018


The UGA Terry College Music Business Certificate Program hosted an Artists’ Rights Symposium Jan 22-23 2018.  Over 250 people attended the symposium. Above is the video of the Grassroots Artists Advocacy Panel.

An Overview of the State of Grassroots Artists’ Rights Advocacy

Mala Sharma, Georgia Music Partners
Blake Morgan, Performer, #IRespectMusic
Miranda Mullholland, Performer, Advocate, Roaring Girl Records
Doria Roberts, Performer, Activist
Rick Carnes, Songwriter, Songwriters Guild
2:30-3:30 PM

In addition to the organization of the grass roots advocacy groups, the panelists discuss; messaging; effective use of social media; consumer education; constructively interacting with federal, state and local government representatives; lobbying for legislation; and discouraging companies from doing business with royalty deadbeats.  Panelists also discuss lessons learned from these successful campaigns and map them onto current problems.

Barf. Just Barf.

David Israelite of the NMPA and Mitch Glazier of the RIAA  have penned an op-ed for Variety Magazine, in which they extoll the virtues of various copyright reform proposals before congress.  While I agree with them on the Classics Act (fixes pre-1972 loophole) and AMP Act (helps producers/engineers receive royalties from digital royalty streams) every day I find myself liking the MMA less and less.

Perhaps it’s because the folks pushing it come out with idiotic statements like this:

“Streaming services have been sued multiple times by music creators who have not been paid properly, preventing them from fully investing in the potential of their platforms”-Israelite/Glazier

That’s right litigious songwriters have prevented streaming platforms like Spotify from investing in their platform.  Yup, in 2011 Spotify et al talked to a magic future-predicting genie who told them they should save their money because starting in 2016 they would be sued by songwriters.  Makes sense.

I guess that’s why upon launch in 2011 they didn’t build any sort of system to license and pay royalties to independent songwriters. And thats why they paid obscenely low royalties right from the start. Conserving money! Our future lawsuits made them pay shitty and infringe in the past!  Whoah!  It’s all quantum mechanics and shit!

We independent songwriters can relate.  While we were not being paid royalties we were also unable to “invest in our platforms.”  You know housing, food, transportation, childcare, healthcare etc.   Must have been really tough on Spotify, and they have to  cover that 30 million dollar a year lease on their offices in the World Trade Center.

And now here come the NMPA and RIAA to save the day.  While we appreciate their attention to matters, songwriters should ask themselves a couple questions:

What were the NMPA, RIAA (and their lapdogs AIMP, and AI2M) doing 2011-2016 while streaming services were failing to pay large numbers of member/songwriters?

Absolutely nothing.  Jack shit.  Diddly squat.  Nada. Nothing.  Nishto. Zilch. Nani mo.  Méiyǒu.

Why are streaming services now willing to sit down and bargain on songwriter pay?

Cause we sued the fuck out them.

RIPE is the FIFA of the Internet and it Enables Europe’s Internet Crime

This is a guest post  (translated from German) by Volker Rieck.  Mr. Rieck has spent considerable time investigating Private Layer a web hosting company that seems to be favored by many copyright infringing sites. Unfortunately Rieck’s investigation has been stonewalled by the quasi governmental organization RIPE.   

According to Wikipedia: “RIPE or The Réseaux IP Européens Network Coordination Centre (RIPE NCC) is the Regional Internet Registry (RIR) for Europe, the Middle East, and parts of Central Asia. It is headquartered in Amsterdam.”

Ostensibly RIPE gets its authority from ICANN which in turn used to get its authority from The US Department of Commerce via NTIA. That changed at the end of the Obama administration.  ICANN is more less independent now but is supposed to consult closely with government.  Since ICANN has (swank) offices in Los Angeles, we would hope that “closely consulting with government” would include US government.  Including the US Trade Representative. 

Alas, like so many poorly governed international organizations ICANN/RIPE is quickly showing signs of  arrogance and unaccountability.  After reading Rieck’s report I would argue that RIPE is corrupt. They are clearly  transmitting fraudulent information to the public. When the error was pointed out they did not correct it. Thus they are complicit. So it is fair to ask, is RIPE the FIFA of the Internet?  Who knows. We will never know unless someone with authority looks into it. There is no way that rights holders can force RIPE to properly follow their own rules.

However the United States Trade Representative could surely ask the US Department of Commerce/NTIA to look into it.  Aren’t they across the hall? If that doesn’t work why not The Justice Department? Certainly the following questions need to be asked by federal authorities: What part of the RIPE charter allows you to keep in good standing members that provide false public information?  What kind of public interest organization thinks it’s their “duty to provide the public with fake registration data?  What part of your charter mandates you protect members clearly involved in mass copyright infringement? You guys are either total idiots or criminal enabling scumbags: which is it? 

Tweet this at staff of US Trade representatives and Department of Commerce and/or NTIA. Rights holders should exercise their 1st amendment rights and loudly protest this blatant failure of governance. You are the victim. Don’t let them get away with it. 

-David Lowery


Internet self-government á la RIPE: A paradise for criminals

By Volker Rieck

Every year in January, the office of the United States Trade Representive (USTR) publishes a list of the worst offenders on the Internet for the past year. This concerns both haptic goods, i. e. counterfeits, replicas, etc. and infringements of intellectual property rights in the form of the non-regulated distribution of films, books, music, software, apps, etc.

The list includes names like the Chinese e-commerce giants Alibaba and Taobao, but also websites like Movie4k, Libgen, The Pirate Bay or Openload.

Contributors to the list include associations such as the Motion Picture Association of America (MPAA) on behalf of the US film industry or the Recording Industry Association of America (RIAA) on behalf of the US music industry.

The role of the RIPE NCC Internet self-administration system will be highlighted here.

Groundhog day

The name of one particular host provider has appeared on the USTR list year after year: Private Layer from Panama or Switzerland. In this respect, the report is not all that clear.

This company provides server space and bandwidth to other “companies”.

According to the USTR report, Private Layer’s “customers” in 2017 included sites such as 1337x. to or primewire.ag. Other sites using the services of Private Layer include youwatch.org, firedrive.com or sockshare.com. All of these are sites that violate the rights of third parties.

The USTR report contains a note about Private Layer to the effect that the operators act more or less anonymously and do not react to information about rights infringements, and that Private Layer’s customers act in the same way.

A closer look at the company therefore appears worthwhile.

Private Layer is a member of RIPE NCC (Réseaux IP Européens), one of five organisations worldwide that are primarily responsible for the allocation of IP addresses and so-called Autonomous System Numbers (ASN). Without such autonomous systems and IP addresses, accessing the Internet and individual websites would be impossible.

The area in which RIPE NCC effectively acts as an arm of the Internet self-government ICANN includes Europe and parts of Asia.

It does not include Central and South America, which fall under the aegis of its sister organization, LACNIC.

Nevertheless, a company such as Private Layer from Panama can become a member of RIPE NCC, receive an Autonomous System Number (ASN) and assign IP number ranges that it has previously received from RIPE NCC.

A question to RIPE NCC as to why a Central American company can do business in Europe so easily with the help of RIPE NCC was answered after several e-mails: if a company has activities in Europe, it can also become a member of RIPE NCC.

So far, so logical. But to think that the Panamanian company is running a data center in Switzerland would be to set oneself up for a disappointment: while the address in the RIPE NCC database indicates a location in Zurich, this is merely the address of a letter distribution center. In German law, a PO box cannot be the registered office of a company. And by any understanding, a post box is most certainly not a data center.

Photo: Company location of Private Layer regarding the RIPE NCC Database
© Christian Buetighofer

A visit to Panama

If the company has no registered office in Switzerland, then the company should be located at the Panama address RIPE has recorded.

But even here it cannot be found. A personal visit to Panama in 2015 at the address given by RIPE NCC led to an office building, but no Private Layer Inc. company could be located there. There was no Private Layer office on the 17th floor, no mailbox and no Private Layer bell button.

Screenshot: Official company information of Private Layer at RIPE NCC in 2015

The way to Zurich

RIPE NCC does not operate a so-called GEO IP database. But other services like Maxmind from the USA do. Such a database can be used to determine where the data center assigned to a specific IP is located.

In the case of Private Layer, this is actually Zurich, but not the PO box mentioned above, but one of the Zurich branch offices of the US company Equinix Inc. where Private Layer has either rented servers or space for its own hardware in Equinix’s data center.

So Private Layer uses the infrastructure of Equinix.

The role of Equinix will not be discussed further in this context.

Everything has a price

Let’s have a look at the price list of Private Layer. The smallest server there costs 89 US dollars per month. The servers on offer are not exactly up to date from a technical point of view. They have a processor that Intel introduced to the market in 2010, and it is therefore difficult to compare the server rental price with those of competitors: finding vendors with such outdated hardware is not easy.

Screenshot: Website of Private Layer with server offers in February 2018

In Germany servers with about 4–6 times the performance (better processors, more memory etc.) can be rented for less than half the price. So it is not the ruinously expensive price point that explains why Private Layer has been able to remain operating in the market for so long.

Private Layer’s selling point is, rather, explained by the USTR report: Private Layer offers a so-called hidden feature. The company’s own operators are anonymous, and Private Layer guarantees the same anonymity and uncontactability to its “customers”.

Private Layer’s customers shy away from the public eye. Nearly all of the WhoIs entries (showing who runs the domain) of the sites hosted at Private Layer have been obscured by special WhoIs services. Attempts to reach the site operators in cases of rights infringements only ever lead to a contact form, never to the operator or even to any company at all.

But the route via the renter of the servers, Private Layer, is also a dead end. As described above, the company’s registered office is either a PO box in Switzerland or a non-existent address in Panama. Documents cannot be served with return confirmation of receipt, and nobody can be reached.

So Private Layer is an attractive proposition for those willing to pay far above the market rate for a weak server in exchange for being able to carry out their business undisturbed and without having to worry about unpleasant investigations.

All fake – we don’t give a damn

How can a non-existent company with a PO box in Zurich become a member of an organization (RIPE NCC) that is responsible for the smooth operation of the Internet?

A company whose business purpose is to provide infrastructure and protection for those who violate rights?

This is exactly the question we put to RIPE NCC. The answer we received is astonishing.

Of course RIPE NCC attaches great importance to accurate data. However, a distinction is made between the member data (i. e. internal and highly private data) and the contact data shown externally.

Accordingly, the internal data is checked by comparison with official company documents.

For external data, the RIPE NCC member only has to observe one thing: an address and an e-mail address must be given. Neither are verified, and RIPE NCC emphasizes that it is not possible to ensure that members also respond.

Screenshot: Fake data of Private Layer at RIPE NCC at the 7th of February 2018
Telephone calls useless – no response, e-mails were ignored, the postal address is a joke

In cases of obviously false data, RIPE “can” contact a member for clarification – with the emphasis on “can”.

Only if a member does not reply or if data proves to be incorrect “can” RIPE NCC exclude it according to its statutes – again with the emphasis on “can”. According to its own statements, RIPE does not see itself in a punitive role: it only wants to provide data. It doesn’t really matter what the quality of the data is. On request, it was emphasized that a person reporting abuse has no entitlement to be informed about the further progress of the case.

Nor do law enforcement agencies fare much better in their quest for information. In a separate section on the website, RIPE NCC explains that only public information is shared in response to enquiries from LEA (Law Enforcement Agencies), because the privacy of members is important. As is clear from the example of Private Layer, this information is fake and therefore worthless, quite apart from the fact that these fakes can be viewed in the RIPE NCC database at any time.

Further information would not be released without a court order or another official order. According to Dutch law, of course. As stated on the RIPE NCC website:

“In such cases, the RIPE NCC strives to protect the interests of its members and will not provide any confidential or private information to LEAs without a court order or other legally enforceable order or request under Dutch law.”

In the case of EWEKA, a court in Northern Holland has ruled that RIPE NCC would also be obliged under Dutch law to surrender the owner’s information in the event of copyright infringements without a court order.

It is plain that the diffusion of responsibility prevails at every level from top to bottom.

The victims are the rights holders whose rights are infringed on a daily basis and who have little chance of defending themselves against this, because deception and trickery are rife at every level.


The time has come to look more critically at the role of Internet self-government and at self-regulation through ICANN/RIPE NCC. The way in which this is managed creates almost lawless spaces that are a dream for every criminal. The example of Private Layer proves this conclusively and is unfortunately not an isolated example.
(In 2016, RIPE received 374 Abuse Reports in total (p. 19 RIPE NCC Annual Report). These have apparently had no consequences; most of them are still under investigation.)

Instead of doctoring the symptoms of undesirable developments on the Internet, their root causes should be analyzed and clearly regulated. Just as in the analogue world, where even a small market stall at a weekly market needs to have a clearly identifiable proprietor.

Imagine a situation involving the sale of contaminated food in which the market owner refused to release the data of the seller citing his own rules and the privacy of the seller.

On February the 13th 2018,7 days after the announcement at RIPE NCC, completely wrong data about Private Layer will continue to be published there.

The legislature should ask itself why it allows the most basic rules of the Internet to be determined by a network of non-democratically legitimized institutions that go so far as to cooperate actively in facilitating violations of the law.

Volker Rieck is Managing Director of the content protection service provider FDS File Defense Service. His expertise in the area of Internet piracy is widely recognized. FDS regularly works on studies relating to issues around piracy. It also supports law enforcement authorities with its data.

Guest Post Marc Ribot: The Red Ink Beneath Streaming’s “New Dawn”


Marc Ribot. Photo ©Barbara Rigon All Rights Reserved

Guest Post from the legendary guitarist Marc Ribot. One point that Mr. Ribot makes we would like to further emphasize at the outset: without DMCA reform there is no “market” for Copyright Royalty Judges to set rates under the MMA. This comes on the heels of a paper from Stan Liebowitz at the University of Texas.  The Liebowitz study clarifies how the safe harbor, contrary to its intended purpose, creates an inefficient and unfair advantage for UUCs when bargaining with copyright owners, meaning that UUCs either do not pay for copyright permissions or, if they pay something, they pay less than the market rate.


The following article examines the effect of ECM’s switch to Spotify – and the larger, tectonic shifts in the industry of ECM’s move is part –on indie jazz labels and artists: and suggests a course of action.

The Red Ink Beneath Streaming’s “New Dawn”

 “structural” failure, “not viable” “we’re fucked”

The Music Modernization Act (MMA) , creates a mechanism for setting of rates and payment of royalties to publishers by streaming services,  while insulating the services from liability for  claims outside its structure. It is widely seen as clearing the way for Spotify’s long awaited IPO.

This, in turn, is seen as a harbinger of the coming of Age Of Streaming.

I don’t think there’s been so much unanimous celebration of a “new dawn” since Joseph Stalin grew a mustache.

The MMA will indeed, if adopted with the changes proposed by Music Answers and others in the indie world, hopefully expand collection and distribution of songwriter royalties for interactive streaming. But even at the most optimistic outcome, streaming is simply not viable for the majority of indie recording musicians and labels.  [1]

And it never will be viable, as long as internet giants like Google/YouTube can profit from copyright infringement with impunity by hiding behind the “safe harbor” clause of section 512 of the DMCA.[2] [see glossary of acronyms at the end of the article].

Until then, for the majority of indie artists, the MMA will at best re-arrange the deck chairs on the Titanic, and at worst, weaken the coalition that might have made a real solution possible.

In genres such as jazz, where clusters of small labels have been able to survive the already devastating effects of bit torrent/piracy and YouTube et al’s legal infringement (60% collapse of industry revenue) by creating niche markets based on physical object sales and legal downloads, the signs are already clear that this consolidation/rationalization of streaming (of which the MMA is a component) will drive many of  the current labels out of business.

What does “not viable” mean? It means that where once revenue received from the sale or licensing of a recording  amounted to more than the cost of producing it,  now, it doesn’t.

“Our issue with streaming is so much greater than just whether an organization like A2IM can double the payout from Spotify from $0.004 per stream to $0.008 per stream. The issue is more structural cause we’re fucked at either payout rate.”

(Yulun Wang, co-owner Pi Recordings).

The problem isn’t just that streaming rates aren’t viable, its that they are displacing forms—cd’s, vinyl, and legal downloads—that are (or were).

I’m an indie artist who has lost money on three of the last four cds I’ve made. What made them possible at all was the investment of record companies like Pi, whose co-owner is quoted above.

Since its founding in 2001, Pi Recordings has released important recording in and around the jazz idiom by Henry Threadgill, Steve Coleman, Muhal Richard AbramsArt Ensemble of ChicagoJames Blood UlmerVijay IyerWadada Leo Smith, and many others.

(Pi happens to specialize in jazz: the economics for indie labels in rock, classical, or other niche markets are similar).

After an initial attempt to distribute through Spotify resulted in receipts of less than $200 — for the entire catalogue!— Pi withdrew.

Pi’s experience with Spotify is typical of small labels on other streaming platforms as well.

John Zorn’s Tzadik label has been a central institution of NYC’s Downtown New Music scene since the early 90’s . Recently, the entire Tzadik catalogue  was (accidently, and against John’s specific instructions) placed on Google’s streaming network for 6 months.  When John found out about this, he immediately withdrew the catalogue: his 6 months of streaming had produced over 250,000 streams,  generating: $300 in total for the entire catalogue.

Tzadik’s total annual budget for recording is c/a $60,000usd. [3]

You don’t need a supercomputer to see what the $300 dollars in 6 months “Age Of Streaming” will do to Tzadik.

That’s what “not viable” means.

What has enabled Pi and other small Jazz labels to survive outside the streaming world thus far has been the existence of a market for CDs and downloads. What in turn kept that market viable was that other important jazz labels, notably ECM, had also withheld their catalogues  from Spotify. This meant that a significant jazz buying public participated in the CD/vinyl economy: ie: they owned cd players and turntables, and acculturated to going to stores, visiting Bandcamp, Amazon, or label websites, to order their music.

Below is the reaction from Yulun Wang, one of the two co-owners of Pi Recordings to news that ECM had finally capitulated to Spotify:

“ECM embracing streaming so wholeheartedly feels like a dagger to the heart – We had long felt that they were part of some informal bulwark of independent jazz labels who were the final holdouts from the streaming platforms. With them falling, it just makes it more difficult for us to continue hold out…

Of course this past weekend it was announced that Cuneiform, a fine jazz label that has been around for over three decades, has decided to take time off to reconsider their future.

I hate to be so dark, but it’s just looking so bleak. 


Yulun isn’t an engaged artist rights activist. In fact he tended to be fairly apolitical on these issues…until recently.

“Structural” Failure, “Not Viable”  “We’re Fucked”

This isn’t just a problem for labels.

It costs me as an artist 5-15 thousand to make a record: and months to years of work.

On a recording I released with a label other than Pi that did stream with Spotify, I made c/a $260 from Spotify for the first 18 months—the prime sales period.

When I asked what passage of the MMA would really mean, a trusted insider to MMA negotiations (and an MMA supporter) told me:  “you know those artist checks you get from Spotify? Well, now you’ll get another one for publishing.”

If the rationalization of streaming further displaces the physical object and legal download market that used to pay for my recordings and leaves me with $520 for a  $10,000 expense…?

That’s what “We’re Fucked” means.

If, for Taylor Swift, streaming was a bad deal, for indie artists and their labels, particularly those catering to emerging artists, or to niche markets like Jazz, Classical, and experimental, the damage is often terminal.

Whether the MMA will make that deal more beneficial for small songwriters rests heavily on the degree to which indie songwriters advocates like Music Answers succeed in amending it.


But its beneficiaries will in either case not include most indie labels or non-songwriting recording musicians. [1]

The root cause of the damage is not Spotify per se. Spotify is, first of all, legal: unlike YouTube or the pirate sites, its business model is not dependent on the mass violation of artists’ copyrights.  I see no reason to disbelieve Spotify’s claim that they are charging consumers, and maybe even paying artists, as much as the market will bear.

The underlying problem is that there IS no market…nor can there possibly be one, so long as YouTube and pirate sites make our work available, without our consent or remuneration, for free.

And YouTube et al will continue to do so as long as section 512 of the DMCA  gives them a special privilege “safe harbor” protection from liability for the damage we suffer when they do.

The “grim” reality faced by Pi and other indie labels or the musicians whose recordings they finance[d] isn’t going away until YouTube et al’s special privilege “safe harbors” are made contingent on their adopting real measures[2]  for stopping mass infringement. The technology already exists for doing so—without hurting “fair uses”.[3]  The legal framework for protecting start-ups or “small business” OSPs[4], or ANY business for which adoption poses a problem is already written into the DMCA.

Section 512 reform wouldn’t “force” anyone to do anything.

But if major corporate online platforms specializing in the distribution of content (like YouTube) fail to take reasonable action to address infringement, including through the use of readily available technologies to avoid providing access to clearly infringing materials, they would lose their special privilege Safe Harbor protection from normal liability.

If section 512 reform passes, we get a market back. If it doesn’t we don’t.

All the rest is hype:  NO industry can survive in competition with an open Black Market making its products available for free.  Sadly, ours is no exception.


The real practical solutions to the current market failure have already been written: The Music Community Response to the Copyright Offices inquiry on section 512 of the  DMCA.[5]

In order for there to be a market in recorded music, these solutions now need to turned into law.

And in order for that to happen, we’re going to need all the Music Community signatories to commit their full energy and resources to reforming section 512.

Make no mistake: Google, YouTube, and others making billions annually in ad-based and data mining profits on infringing content do not like 512 reform.  They’re going to fight it tooth and nail…and they have the sharpest teeth and nails that money can buy.  Any realistic chance that such powerful opposition can be overcome lies in the hope that the Music Community’s power can be expanded – for example by mobilizing the memberships of its mass organizations – not reduced.

The coalition which drafted and signed that “Music Community” document, including the  AFM, SAG-AFTRA, A2IM and, (after negotiating amendments) SGA, have stuck together to endorse the MMA,  even though their non-songwriting or small songwriting memberships will benefit only marginally, if at all, from the bill’s passage.

Its time for those “Music Community” coalition organizations whose members will benefit from MMA—NMPA, SESAC, ASCAP and BMI –to return the favor by demonstrating in some tangible form their commitment to fighting for 512 reform now.

Some trustworthy advisors have warned that failure to pass the  MMA  would kill the chance for ANY pro-artist legislation—including section 512 reform—for at least 10 years.

Others have claimed that making the MMA’s passage contingent on section 512 reform is simply not realistic.

But “realism” cannot mean participating in the rationalization of our own extinction.  Drowning under 3 feet of water instead of four is not an acceptable compromise.

If the MMA’s “Grand Bargain” being negotiated by our leaderships paves the way for streaming to kill cds and downloads,  leaves us with $500 to pay $10,000 bills,  drives labels that used to fund our records out of business, and splits the coalition that would have enabled meaningful reform,  then why should we care whether it passes?

The large majority of my union’s recording members are indie musicians.
What good does it do us to read from a distance of the gleaming benefits and protections of a union contract while, like the urban slum dwellers of Blade Runner, our real lives consist of scavenging to self-finance recordings in the wreckage of the recording economy (or doing sessions for equally cash starved indie labels or artists subject to the same impoverishment)?

And what good will it do any AFM or SAG AFTRA member if, as some have predicted, the Major labels – which DO pay scale – are only backing the MMA to pave the way for Spotify’s IPO, after which they can cash in their equity, write golden parachute contracts for their chief executives, downsize into distribution offices for their back catalogue,  and cease (directly[6]) funding new recording?[7]

Beneath the unanimity of the Music Community’s support for the MMA, there is deep dischord, with many quietly pushing for amendment behind the scenes; others, like noted composer/bandleader and artist rights advocate Maria Schneider calling openly for amendment; and many others (including trusted artist advocates David Lowery, and atty Chris Castle) opposing the bill outright.

My union, the AFM, supports the MMA. But my AFM Local, 802, has quietly urged the AFM to support Music Answer’s proposed amendments.

Having attended an open meeting on the MMA at local 802, I can tell you that even such conditional support was contentious among rank and file union members.

If the MMA’s backers want to keep simple narratives of unanimous musician uplift and support in the public eye,  if NMPA, ASCAP,  and BMI want to deliver the MMA’s substantial benefits to their big publisher and major songwriter members, and if their Music Community union allies want to avoid a rank and file revolt, then I would advise all the above to take immediate steps to ensure inclusion of Music Community section 512 reform in Senator Goodlatte’s proposed comprehensive reform bill.[8]

If such attempts prove impossible to achieve, the Music Community organizations—ALL OF THEM– should present tangible proof that they are willing to develop, FUND, and commit to a campaign to fix the real problem: 512 of the DMCA.

Maria Schneider and  Chris Castle’s opposition to the MMA has focused on the ways the bill’s fine print undermines some of the gains for songwriters advertised as it goals.  Other pro-artist groups—SGA, SONA, and Music Answers – have pursued the bill’s amendment, rather than its defeat, because, while acknowledging many of the same critiques as the bill’s opponents, they believe that its aggregate effect, if amended, would be beneficial for songwriters.

But while feverishly guarding the castle walls against the MMA’s hidden effects on songwriters, we may have permitted the real Trojan horse to pass through the main gate unopposed: and that  horse is strategic: the undermining of the basis for unity of the ONE coalition – the “Music  Community”[9] which up till now has included major labels, major publishers, and major songwriters– that can achieve section 512 reform.

It is my strong suspicion that if indie artists/musicians wait till after the MMA passes to try to get the Music Community to win or commit to 512 reform, we— and small songwriters– are going to be left with about as much negotiating power to achieve that goal as the Trojan women[10] after their city’s defense was breached.

I want to be clear that I consider payment of royalties to songwriters — the stated intention of the MMA–  entirely justified and fair. And I’m grateful to Hakim Jeffries, Bob Goodlatte, and the MMA’s other congressional supporters for their efforts to redress this longstanding injustice.

But the economic survival of the majority of working recording musicians[11] and the labels which finance them  is dependent on 512 reform. That statement is true today, and will be radically more true in the future streaming economy that the MMA will help create. [12]

Our representatives can address our grave concern by acting to put their budgets and political leverage where their USCO policy statements[13] are. We need an actionable plan to win section 512 DMCA reform NOW—while united action is still possible. “Call us after the MMA is passed” won’t do.

Because if the MMA means that our realistic hopes for section 512 reform are being sold,  then as far as I’m concerned: Spotify can keep its $260 spare change, and, to paraphrase Johnny Paycheck,  they, and Google, and ALL the powerful organizations which have signed on to it can ‘take this “Grand Bargain”… and shove it.’



A2IM American Association of Independent Music: the indie label trade organization.

AFM American Federation of Musicians: the musicians union

DMCA: Digital Millenium Copyright Act of 1997-98: the US law governing copyright on the internet.

MMA: Music Modernization Act.

NMPA  National Music Publishers Association: representing large publishers

RIAA, Record Industry Association of America: the major label trade organization.

SAG-AFTRA Screen Actors Guild—American Federation of Television Radio Artists: the union representing vocalists and actors.

SGA, Songwriters Guild of America, an indie song writers organization.

SONA Songwriters of North America: an indie songwriters organization

USCO – U.S Copyright Office


[1] This matters for several reasons.

  1. Jobs: although the indie sector is a minority of market share, it provides the large majority of work.
  2. Culture: every single current pop genre began as a niche market. If you kill the cultural goose, no more golden omelettes.

[2] > end special privilege ‘safe harbor’ protections for corporate Online Service Providers (OSPs) with ‘red flag’ knowledge of mass infringement.

>end  the game of whac-a-mole: reform the DMCA so that  a single take-down notice effects the take-down of all identical files on a site…permanently.

> The technology to protect our rights – without harming freedom of speech or genuine ‘fair uses’ — exists now: and should be made standard (Standard Technical Measures, or STM’s) for all major hosting platforms specializing in the delivery of content. No “Safe Harbor” for for major corporate Online Service Providers (OSPs) which fail to adopt STM’s.

[3] See Audible Magic’s 2016 submission to the Copyright Offices inquiry on Section 512 of the DMCA

[4]  The figure cited by a PRO-artist advocate for defining “small” was capitalization of 30 million usd or less.

[5] The  full  report can be found by searching  for “American Association of Independent Music et al (“Music Community) first round comments https://www.regulations.gov/docketBrowser?rpp=25&so=ASC&sb=title&po=0&s=music%2Bcommunity&dct=PS&pd=ALL-07%7C01%7C16&D=COLC-2015-0013

The bullet points in footnote 6 are consistent with its recommendations.

[6] The practice, already begun, of licensing  non-union indie recordings would no doubt continue.

[7] And what good will it do our culture and economy? Back catalogue sales are great: but we didn’t become a world emulated cultural model or a major exporter of  music by funding the dead.

[8] https://www.tennessean.com/story/money/2018/02/21/goodlatte-unveil-sweeping-music-copyright-reform-package-next-month/354500002/

[9] op cit see footnote 9

[10] suffice it to say that 3000 years after the sacking of their city, the word Troia still means prostitute in Italian.

[11] including small songwriters who will receive some benefits under the MMA. Songs large and small don’t produce income if they’re not brought to market in the form of a recording.  We all rely on section 512 reform to restore a healthy market for recording.

[13] Music Community Response to the USCO Inquiry in section 512 ibid.

[1] note: although indie artists’ work accounts for a minority of market share, it represents a large majority of employment in the industry, and we represent an even larger majority of working artists.

[2] http://www.cisac.org/Newsroom/News-Releases/Copyright-safe-harbours-distort-digital-market-profit-tech-giants-and-harm-creators-new-economic-study-finds

[4] I’ve heard similar expression from other indie labels and musicians, but it rarely finds its way into the media. Then again, no major conglomerate is paying the publicists who might put it there.

Not only does the move to streaming favor the large-back- catalogue Majors against their indie competitors, but the Major Labels all have equity in Spotify, whose coming IPO would not benefit from the amplification of voices such as Yulun’s.




Guest Post by @schneidermaria: An Open Letter to David Israelite of the NMPA, and Anyone Interested in the Music Modernization Act


Dear Mr. Israelite,

I received your point-by-point response that you apparently shared with legislators and interested persons in response to my 10-point critique of the MMA. Thank you for your perspective. Perspective is important. But in my opinion, your letter contains misdirection, many important omissions, and inaccuracies. I explain this below, and in much greater detail in this downloadable PDF point-by-point response to your letter. I’m just giving my perspective, but I think it’s an opinion educated by years in the real trenches of the actual music business.

The letter below is long – I know. But THAT’S how many things are problematic with this bill in my opinion. I hope we all agree, expediency shouldn’t supersede getting things right for music creators and industry sustainability. I ask creators, industry people and lawmakers to read this entire letter with a mindset of getting this bill drafted right. I believe these points aren’t only optimal for achieving success, I believe they’re mandatory for achieving success.

Mr. Israelite, you used the word “confused” several times in referencing my open letter. I’m not confused. But, my perspective is very different than yours. I’m asking you to read my perspective which I know I share with countless musicians and songwriters in this country. I’m asking you to advocate for nine simple “fixes” that will ensure the MMA is a success for music creators, and ultimately, everyone.

We both respect and are deeply grateful for the amazing support we have received from our Congress. That’s wonderful. But the MMA, as currently written, is not yet wonderful. Congress is expecting the MMA to directly help music creators who have been severely damaged from the current streaming market, and I’m throwing out my ideas to get us to that goal.

Here’s a new sobering statistic: This recent article points out how 99% of all streaming on Spotify involves only 10% of all songs. If true, that means 90% of music is splitting only 1% of the financial pie. Who is living on molecules of pie? Musicians and composers I revere: Pulitzer Prize winners, MacArthur winners, NEA Jazz Masters, Grammy-nominees and winners (those you don’t see on the telecast), musical icons, contributors to American and world culture, masterful musicians and songwriters revered in local communities but that aren’t widely known, leaders of orchestras and bands, teachers at conservatories and colleges, and selfless mentors. We are in niche genres: jazz, classical, Latin, world music, as well as hip-hop, folk, gospel, blues, electronic, rock, indie, etc. It’s a massive and diverse group, the vast majority of songwriters in the U.S.

We, the 90%, are the collateral damage in the digital economy as presently structured. And much of it has come at the hands of the very same corporations that you trying to make sure will run this next MMA show. While the MMA has some strong ideas, it vests WAY too much power in the hands of the biggest publishers and streaming companies. Why am I so concerned? Because I and countless colleagues in these niche genres have learned painful lessons we’re not keen on repeating.

Lesson 1: The three major music companies that are locked and loaded to run the music licensing collective (let’s call it Corporation A) are the same companies that allowed themselves to be enticed by the self-serving Svengali, Daniel Ek, whose beginnings were built on infringement (uTorrent). The day Warner, Universal, and Sony bit a huge chunk of poison apple in the form of equity in Ek’s Spotify, they traded their contracted musicians’ and songwriters’ valuable creations for ads. That tectonic shift gave Ek most of the world’s music, it legitimized “free,” and it created a gaping conflict of interest for the Big 3.

Songwriters and attorneys argue if it was a “fiduciary breach.” In my opinion it is a massive breach of trust and ongoing conflict of interest. And as the 90% have suffered a huge collapse in income, inversely, we watch these companies celebrate their earnings from 10% of songs. That conflict of interest and breach of trust are very relevant to the MMA, and this history absolutely must not be ignored in writing the governance sections of the MMA. And, if that reality is painful or upsetting for industry to read, I can only answer that they themselves created it.

Lesson 2: There’s something else occurring as a result of streaming that’s critical to understanding the niche musician’s and songwriter’s perspective. It’s that many, if not the vast majority of record companies, are no longer advancing money for a lot of music on their labels. It’s now the artists and creators, in countless numbers, who are each sinking tens of thousands of dollars into making their own records. Many still go with a label despite having to front the costs themselves just to be part of a distinguished label roster. There are many fine small labels doing everything they can to make that a worthwhile trade, and some still struggle to front budgets. The point is, those niche labels and independent musicians face either a zero, or statistically insignificant, chance of a return on their investment through streaming. Many report barely paying for a sandwich with their royalties.

If one only cares about the top 10% of songs and launching superstars to the stadium echelon, and keeps the blinders on for the rest, I suppose one can claim some successes with streaming. But if one values the wide array of music our country and the world has to offer, then our biggest music corporations have failed us, and failed our culture of music as a whole, by cashing in on Ek’s unsustainable business model. Spotify’s IPO papers confirm to me the streaming model’s income and wealth inequality as well as unsustainability. The 90% knew this years ago.

Lesson 3: As I see it, those set to run the show under the current draft MMA have a terrible track record in this arena: The NMPA owned the Harry Fox Agency themselves and was already once tasked with solving the Spotify mechanical issue. In my opinion, that effort failed miserably: the feuding, in-fighting and finger-pointing that occurred between the NMPA, Spotify, and HFA, and the ugly lawsuits brought by independent songwriters and small publishers resulting from what seems to me to be a collective failure to properly handle and respect mechanical royalties, left these companies acting like the Keystone Cops. Yet ironically, it is the NMPA and the Digital Media Association (DiMA – companies like Google, Spotify and Amazon) that, in my view, are steering all power under the MMA to the same cast of characters, while conspicuously avoiding objective oversight and reasonable checks and balances.

I have no problem with the NMPA or its members and Spotify being involved in the solution. But I have a HUGE problem with them controlling the solution, and controlling the entities that will be formed under the MMA.

These three lessons frame many of our perspectives on the MMA. It’s a grim reality that explains why I don’t trust certain entities to run the show.

Below are simple, specific proposals that I think are rooted fairness and common sense that will greatly will improve the MMA’s actual chances of ongoing success for all of us.

1. Songwriter. If you’ve not yet amended the definition of “songwriter,” will you agree to advocate for a rewrite that would requires a “songwriter” to be someone with a recognized and substantial professional career based on songwriting or composition? By the current definition, even an employee of a publisher who long ago wrote part of a lyric of one song would qualify as a “songwriter.” A definition that gives songwriters and composers that assurance is necessary.

2. Equality. Imagine that Congress passed an Act that would set up a private entity to tackle the issue of “Women’s Health in the United States.” Then imagine that the board of directors was crafted to have only TWO women on the board of TEN people. Pretty outrageous, right? Now, further imagine that women were offered the prospect of the board being expanded to 14 total members, and instead of 2 out of 10 being women, it was now going to be 4 out of 14 (an 8% increase, but still a very small minority). Finally, imagine that the 10 male members were all executives at big Pharma, earning big salaries and bonuses from expensive and very controversial women’s pharmaceuticals. We’d all find that horribly outrageous, right? Now, imagine how infuriated women (and men of conscience) would be if the trade association for Big-Pharma consoled women who advocated for a balanced board, with the following catchphrase: “don’t let the perfect be the enemy of the very very good.” (your words at the end of your letter)

I hope this spot on analogy offers you and others perspective. Therefore, can we agree that the “Collective,” (I call it Corporation A) should have governance that, as between publishers and songwriters, has at VERY LEAST, 50% songwriters – songwriters chosen by songwriters themselves? Independent songwriters deserve an equal presence with publishers on a board that will control OUR works and economic future. Who wouldn’t support a 50/50 board?

3. Board Diversity. Can we agree that the Board for the “Collective” (Corporation A) would be MUCH better if it also had several “outside” totally independent voting board members, especially members who have actual experience and success in leading the development of new software, database and cloud based systems? There are countless such all-stars and experts. Corporation A is really a technology company that will be based on system design, program management, and vision in the field of data management and cloud services. To achieve success with that tall order, technology expertise must be included on the governance board itself, not relegated to some “advisory” committee, or worse yet, to some downstream subcontractor (who could be a conflicted DiMA member like Google).

What on earth are 10 publishers doing at the helm of a technology company? If our company was tasked to design and build a new artificial heart, we’d want the worlds’ best surgeons and bioengineers on the board, not 10 big insurance company representatives and 4 sick patients. Independent objective technology experts (e.g., obviously not Google or anybody else from, or related to, Corporation B due to conflicts of interest) will bring more value to this board than the songwriters and publishers combined. I am confident our elected leaders would agree that this would markedly increase the chance for this “technology company” to be a success.

4. Open Competition. Can we agree that a) the publishers should not have a veto power over who is selected to be Corporation A; and b) the members of DiMA should not have a veto power over who is selected to be Corporation B? The language in the MMA, “endorsed by, and … substantial support of,” (used for both Corporations A and B, pages 17, line 21, and page 58, line 8 of the Government PDF of the MMA) basically gives outright veto power to the big players. I am willing to bet that Congress would be more comfortable if the selection of these two entities was done in an open, competitive process, where creative and talented teams of people: small business, minority-owned, women-owned, technology-based collaborative teams could freely assemble and compete, and would be assured of a fair shot at winning this great opportunity.

The Register of Copyrights should be able to pick these two entities through an open market, not have her choice restrained by a closed back room. Replace the language, “endorsed and supported” with language requiring that each entity: “will be chosen by the CO through an open and competitive process, where selection is based on the strength and merits of each applicant, and where conflicts of interest are disclosed and addressed.” Our government mandates that same process even for choosing a vendor for toilet paper! Surely we’d expect just as much when entrusting an entity to guard the economic future of music creators. Wouldn’t we?

5. Business Continuity. Can we agree that if either Corporation A or B goes belly up, and/or the CO needs to pull the plug, the MMA should clearly state to everyone that none of the software, data analytics, or algorithms, belongs to the entity? We can all fairly agree that Spotify would not exist if not for the music, right? So then, considering that this whole investment is basically underwritten by revenue generated by the music that songwriters have written, we need to be assured of “business continuity” should things go sour.

The MMA is NOT intended as an opportunity for a private entity to build trade secret assets that could further cripple the industry. We cannot allow this huge investment in technology to be usurped by any party should Corporation A fail in living up to its expectations. It’s Business Continuity 101 stuff. So rather than assure us that somewhere downstream, there MAY be regulations that might clarify this as you suggest, let’s build that HUGE point right in the section of the MMA (page 31, line 16) that addresses the Database. Something simple, like: “All data submitted to the Collective will be owned by those parties submitting the data, and is licensed to the Collective for the sole purpose of fulfilling its duties under the MMA, and will not be assigned to any other party. All data analytics, algorithms, software, APIs, software tools, resultant data, and aggregated data developed by [the Collective] or its subcontractors will be held in trust by the U.S. Government, and will not be exploited or encumbered by [the Collective] for any purpose other than as authorized under this Act, and will not be encumbered or sold or assigned to any other party.” Should something unforeseen happen, we’ll all need to be protected.

6. Meaningful Audit Rights. Can we agree that meaningful audit rights for independent music creators are necessary? After all, the MMA IS stripping away our rights to bring a suit for infringement, so let’s look at the tradeoff: The current provisions (page 42, line 5, through page 45, line 20 of the government PDF) are great, if we’re talking about Sony, Universal, and Warner, that can afford Deloitte. But if I want to audit a $25 payment I received from Spotify, I can’t be expected to hire Deloitte for the impossibly complex multi-step process laid out in the MMA. Two simple requirements wouldn’t hurt anyone: 1) a streamlined audit right for small amounts (details could be ironed out through regulation), and 2) spot audits every six months of random independent music creators’ accounts, just so the CO is exercising some ongoing QA/QC on the Collective’s systems and performance. Both create great incentives for the Collective to do a good job, saving money in the long run, and increasing everyone’s confidence.

But there’s something else lurking in those audit rights: Today, if I sue someone for infringing my copyright, I have the right to recover attorney’s fees in certain cases. But under the MMA, not only is that absent, but I’d be required to hire a CPA and pay for my own legal and audit fees, even if I win. That’s not fair in light of what we’re giving up. We deserve the right to recover our reasonable costs if we’ve been wronged by Corporation A or B. It’s fair, and keeps entities on the up and up. That’s the purpose of the attorneys fees provision in the current copyright law. Why should we give that up?

7. Black Box. Independent creators will most likely be the ones who won’t know to sign up with the Collective, or who won’t have filed a registration with the CO. Their money, largely, will end up in the black box. I meet countless musicians and songwriters who know nothing about mechanical rights or copyright.

My opening statistic showed that 90% of the music on Spotify shares 1% of the pie. The black box money will most assuredly be out of that group. If Corporation A can’t control their budget, why should these unpaid creators unknowingly foot the bill? Shouldn’t the money be “borrowed” from those that MOST benefit from the MMA? (If it’s even legal for trustees to “borrow” money held in trust.) This bill needs to create meaningful incentives like this for the Collective to not overspend. (Not to mention this “borrowing” right of the Collective seems to be contradicted by the obligation to hold those royalties in a black box for 3 years.)

Secondly, the idea that this black box money should be distributed (after 3 years) to songwriters and publishers according to market share is absolutely abhorrent. I don’t often bet my life, but I’d bet my life that Kendrick Lamar, Taylor Swift, Bruno Mars, Lady Gaga – name any bigtime music creator – would not want to receive black box money belonging to independent music creators who haven’t received it because they didn’t yet know how to get it, or whose song had a wrong spelling, wasn’t filed at the CO, or whatever. No music creator would knowingly endorse something so skeevy. That money should be held until it is claimed, and if after many, many years, it’s still unclaimed, perhaps it could go to scholarships or something else worthy.

8. Immunity. Some legal commentators have given “just cause” to be concerned whether parts of the MMA are unconstitutional. Today, many creators don’t file copyrights: it’s expensive, and it’s not required under international laws. I have that right under the Berne Convention that the U.S. has signed. If a band of young kids in Peru, Canada, Nigeria, the UK, you name the country, records 10 of their songs, they submit them to Spotify, and it goes viral, are you telling me that they won’t get paid until they figure out that they need to first file the papers and possibly pay hundreds of dollars in fees to the U.S. CO to register the songs in the U.S.? That’s the way I read the bill. Can it be that we’d require the entire world to pay registration fees to the U.S. Copyright Office before they are allowed to get their first dime from Spotify? In addition to possibly being unconstitutional and in violation of rights under the Berne convention, it smacks of musical colonialism. I suggest the MMA be fixed so creators aren’t left with the short stick.

9. Immunity for the “Collective” (Corporation A). If you hired a financial planner for your mother, and that planner gave you a contract saying, “Even if I am negligent, sloppy or incompetent, and/or even if my services deviate from the standard of reasonable care, you and your mother can’t come after me when I lose all of your money,” you’d be shocked at their nerve. The same goes for surgeons, accountants, or anyone else in society that owes us a duty of care. So, I was shocked to read the fine print (page 93, lines 9-24) about the Collective’s lack of liability, should it screw up.

The MMA basically says that the Collective “shall not be liable to any person or entity” for negligence, sloppiness, or incompetence, but can only be liable if proven “grossly negligent.” “Gross negligence” is nearly impossible to prove. In fact, “gross negligence” basically requires conduct to be intentionally reckless – conduct so bad, and so rare, insurance companies won’t even insure against it.

As I read the MMA, the “Collective” (and its board) are basically immune from liability, even if they completely screw up the whole system through incompetence and negligence, and even if there are millions lost. In my opinion, that’s extremely irresponsible.

Let’s change the tricky phrase “in a manner that is not grossly negligent” to “in a manner that uses reasonable care, and is not otherwise negligent, or grossly negligent.” Let’s make sure Corporation A would be liable if it acted with incompetence, or negligence.
None of these points are unreasonable or illogical. Each directly reduces risk of failure. I would hope we’d all advocate for these common sense, simple language changes to the MMA.

Let’s create a new version of the bill that maximizes the chances of success, minimizes the chances of conflicts of interest and/or failure, and fulfills the fundamental goal of Congress to directly help the music creators.

And for anyone who received David Israelite’s letter and would like to read my point-by-point response, you may download it here.

You can read my original open letter, “The Music Modernization Act – The Devil is in the Details,” here.

Maria Schneider


How Artists Can Fight Internet Monopolies: UGA Terry College Artists Rights Symposium Keynote By Jon Taplin

Readers of this blog know that that Terry College of Business at University of Georgia hosted the inaugural Artists Rights Symposium Jan 23 2018.   All the panel videos are now available on the Terry College of Business YouTube Channel. 

Here is Jonathan Taplin’s Keynote.  It’s fantastic.  Funny, concise and likely to make your blood boil.  Watch it.


@CISACNews: Copyright “safe harbours” distort digital market, profit tech giants and harm creators, new economic study finds

This study showing the negative economic effects of safe harbors is great timing as we are reviewing multiple brand new safe harbors proposed to great fanfare in the Music Modernization Act that protect Spotify.  More on this to come as we review the welcome study by economist Stan Liebowitz, Ashbel Smith Professor of Economics at the University of Texas at Dallas.


Paris, France –  February 27th, 2018 – Copyright “safe harbour” rules, drawn up a quarter of a century ago to help nurture early online commerce, are today distorting the digital market, profiting tech giants and leading to significant underpayment of copyright owners, a new US economic study says.

“Economic Analysis of Safe Harbour Provisions”, by Ashbel Smith Professor Stan Liebowitz of the University of Texas at Dallas, is the most detailed economic examination to date of how copyright owners have been damaged by so-called “safe harbour” rules in copyright law.

The economic study has been commissioned by CISAC, the International Confederation of Societies of Authors and Composers. CISAC is the world’s leading network of authors’ societies, with 239 member societies in 121 countries together representing over 4 million creators of music, audiovisual, drama, literature and visual art.

Commenting on the study published today, CISAC Director General Gadi Oron said: “This study shows that copyright safe harbours, designed for a 20th century internet, urgently need re-examining in the 21st century.  Instead of shielding internet companies that merely offer storage facilities, as was their original purpose, safe harbours are today being used to shield tech giants from rewarding creators for their work [like the eminent domain sections in MMA that take away rights to sue infringers retroactively]. This is not a problem that can be solved by industry alone – it is a responsibility for governments that care about the cultural and creative sector. Creators deserve 21st century laws that ensure fair payment for their work, not laws that cause the value of their works to be siphoned away to global tech companies. Technology has evolved, and the law should evolve with it”.

Professor Liebowitz is a leading author, researcher and academic in the economics of intellectual property, networks and new technologies. Among the findings of his study are the following:

  • Because of the safe harbours, User Upload Content services such as YouTube have “an inefficient and unfair advantage” when they negotiate rates for permission to use copyrighted works on their sites.
  • As a result, UUCs either do not pay for copyright permissions or, if they pay something, they pay less than the market rate.
  • Other online services (such as subscription services, e.g. Spotify and Apple Music) are at a competitive disadvantage when competing with UUC platforms. These services generate lower revenues and have a reduced user base, because of the distorting impact of safe harbours.
  • As a net result, because of the distorting knock-on effect of safe harbours on the wider market for creative content, copyright owners are seeing reduced copyright payments from both UUC and other services. These reductions would appear to be “very substantial”.

Read the one page summary of the study here.

Read the study here.

Guest Post: Revelations from SX Works NOI Lookup

by Chris Castle

You’ve probably heard about the “mass NOI” problem resulting from the Copyright Office allowing Big Tech to profit from a loophole in the Copyright Act.  The loophole permits digital music services to get away with what would otherwise be both infringement and nonpayment of royalties under yet another safe harbor, this time from 1976.

Remember that under U.S. law, unless the service has a direct license with the copyright owner, a digital service can rely on the government’s compulsory license by sending a “notice of intention” (or “NOI”) to the copyright owner.  One could argue that those are mutually exclusive end states, so keep that in mind.  As anyone who has done song research knows, there are a number of reliable places to look for a song copyright owner, starting with the performing rights societies like ASCAP and BMI that provide a free lookup service on their websites.

But…you can’t find what you don’t look for.  Enter the loophole.  The Copyright Act says that if you can’t find contact information for the song copyright owner in the Copyright Office’s public records, then you can send your NOI to the Copyright Office instead of to the copyright owner.  Then you are deemed to have a compulsory license after that service date.  The problems is that while the government might have thought in 1976 when the section was enacted that they had to tie up that loose end by referencing the Copyright Office, they probably did not realize that they were also requiring a look up in what was to become arguably the least reliable source of song information.  Not to mention that updating the Copyright Office records is done at a waddling pace.

Oh and one more thing–if the service sends the address unknown notice to the Copyright Office, they don’t have to pay royalties until the copyright owner becomes identifiable in the public records of the Copyright Office, which may be never.  (I have an article in the American Bar Association Entertainment & Sports Lawyer periodical on this for those who want more information.)

The way the loophole works is that if a song has not been registered in the Copyright Office (which is not required) then the service can say that the address of the copyright owner is “unknown,” even if the service has actual knowledge of the copyright owner’s contact.  See the loophole?  Even if they know who you are and how to reach you, they can say they don’t know if you haven’t registered your copyright–which you are not required to do unless you’re planning on suing.  In addition to actual knowledge, there’s also the argument that a reasonable person could have found the song copyright owner if, for example, that song is in the Billboard Hot 100’s Top 5.

If you’ve ever tried to register a copyright, you know how long the Copyright Office can take to get you a conformed copy of your registration–months.  Why?  Because they appropriately give your registration the once over to make sure that you filled it out correctly and giving that attention takes time.  Anywhere from six to ten months in fact.

Copyright Registration Processing

The large print giveth and the small print taketh away….

Unfortunately, the Copyright Office does not give the same degree of attention to address unknown filings.  In fact, as far as I can tell, they give no attention at all to address unknown filings.

Historically, there were a handful of these “address unknown” filings.  But all of a sudden after independent songwriters and publishers started suing Spotify, millions of “address unknown” filing started appearing at the Copyright Office in April 2016.  There are now over 60,000,000 of these notices on file that have been posted.  That means that there are 60,000,000 free licenses in effect.

When the Copyright Office started getting these filings, they began posting them in huge compressed files.  So if Amazon filed an address unknown NOI, it would appear to be one or a few NOIs, but each one of those NOIs had an Excel spreadsheet attached that had tens of thousands of songs on it in most cases.

NOI June v 1 TALA-2

Given that the Copyright Office chose to post the NOIs in this manner, it was essentially impossible for a songwriter or even most music publishers to search all of the NOIs to see if their songs were included or included incorrectly.  This creates an obvious and forseeable problem for anyone wanting to check if their songs were incorrectly included in a mass NOI.

Since the Copyright Office wasn’t checking and since they made it virtually impossible for anyone else to check, it is likely that there are many incorrectly filed “address unknown” NOIs, which means that there are likely an equally massive number of infringements as those compulsory licenses would be invalid.  Of course, services would argue that if their compulsory license fails, they have an implied license since they notified song copyright owners of their usage through the address unknown NOI at the Copyright Office and nobody caught them.  Notwithstanding the fact that the Copyright Office chose the least transparent way to make the information available to the public.  So is the address unknown NOI good notice to the world if the world can read it?

How bad is this?  If there is even a 1% error rate, that is 60,000 songs.  Seems like a lot to me, and I would bet that the error rate is a lot higher than 1%–courtesy of the U.S. government.

Remember this started in April 2016.  No one has lifted a finger to fix it since then, but the Music Modernization Act has a new safe harbor that sweeps all these NOIs into the new blanket license without anyone ever checking to see if they were filed correctly.  Given the other safe harbor–I know, the MMA has so many safe harbors for Big Tech that it’s hard to keep them straight–that protects infringers from suits for statutory damages filed after January 1, 2018, it is unlikely that anyone will ever pay the piper for this massive and industry wide screw up.  A good reason for all mass NOI filings to be excluded from the MMA’s litigation safe harbor.

Or in the words of Judge Patel, “You created this monster, you fix it.”

A good place to start fixing it is by indexing all of the Copyright Office mass NOI filings and making that searchable database available to the public.  There are a number of companies that indexed the address unknown filings but SoundExchange recently launched theirs.  The SX Works NOI Lookup is free to use and very fast. Here’s a video describing the service.

I tried running a few queries on it to see what showed up using the top five songs from the Billboard “Hot 100” singles chart starting January 1, 2018, a date that will live in infamy.

Here’s what I found.  First, we have “God’s Plan” by Drake.  Remember, if the song is in the NOI lookup, the service is claiming they can’t find the song owner.

Gods Plan Drake SX Lookup

Notice that Spotify has four separate NOIs filed for “God’s Plan” and each one lists that song’s writers.  Notice that Google and Amazon list the writers as “unknown”.  Here’s a little speculation–the reason that both Google and Amazon list the writers as “unknown” is probably because they each got the same new release feed on the record side and did not take advantage of the songwriter information provided by the label.  Or they did no matching work–notwithstanding that Google owns Content ID which very likely has all of the song ownership information already inputted for them.

Spotify on the other hand does have the songwriter information, so either they were given it by the label and passed it through or they got it from another source.  It seems unlikely that they had all the songwriter information and none of the publisher information.  It must be said that the labels are under no obligation to provide any publishing information much less clear the rights.  This is the deal Spotify (and all the other services) made–repeatedly.  So the labels can’t be blamed for the lack of songwriter or song owner information.

Here’s the NOI look up for Ed Sheeran’s “Perfect”:

Perfect Ed Sheeran SX Lookup

Again, Spotify tends to have the writer information and Google and Amazon rely on “unknown” for a top 5 record (that also went #1).  But it’s “address unknown” for all of their NOIs.

You may be wondering how it is that these writers aren’t getting paid for huge numbers of streams.  I wondered that, too.  But–remember that there are two ways for services to license songs: voluntary direct licenses and compulsory.  Here’s some speculation:  the top songs are written by songwriters who very likely have publishing deals with major publishers and major publishers very likely have direct deals with Spotify, Google, Amazon, etc.  So these services don’t need to send “address unknown” NOIs in order to get a compulsory license.  They already have a voluntary direct license and they probably paid a pretty penny to get it.

And notice–Apple is nowhere to be seen in these mass NOI filings.

How about Bruno Mars’ “Finesse”.  Yep, address unknown:

Bruno Mars Finesse SX Lookup

This is getting to be a pattern, right?  “Finesse” has been a top 5 single for weeks.  How could they not know who to license from?  At least Google lists “Bruno Mars” as the writer–good guess for the biggest search company in the known universe.  Think they looked it up in Content ID?  And as we saw before, Spotify lists all the writers.  But no copyright owners, I guess.

So why would these Big Tech companies want to have both a compulsory license and a voluntary license?  Maybe so they will be covered with a royalty free license if the voluntary license should expire for some reason?

Is it really correct for services to be able to burden the Copyright Office with these mass filings for songs that are already subject to a voluntary license?  Which gives them actual knowledge of the song copyright owner?

Here’s “Rockstar” by Post Malone.  Apparently, the biggest corporations in the world have no idea who owns the song.

Rockstar Post Malone

No idea who owns “No Limit” by G-Eazy either, although both Google and Spotify know the writers.

No Limit G-Eazy

Or Lil Pump’s “Gucci Gang”….

Gucci Gang Lil Pump SX Works

Or Camila Cabella’s “Havana”….

Havana SX Lookup

although it’s quite easy to find in ASCAP’s database….

Havana ASCAP

And no joy on Imagine Dragons, either:

Thunder Imagine Dragons

Or Halsey’s “Bad at Love”

Bad At Love Halsey SX Works

So let’s get this straight.  None of Google, Amazon, Spotify, or iHeart could find any of the copyright owners of any of the songs in the Top 5 for the last 7 weeks.  Or are they sending “address unknown” NOIs as a matter of policy for all songs recorded in the tracks delivered to them by labels including songs already available to them under a voluntary license?  Which is more likely?

In the latter case, this gives them a back up compulsory license that will continue if their voluntary license should ever expire.  Or if they allow it to expire.

Are they really relying on these fake compulsory licenses and not paying royalties or accounting on songs licensed under a voluntary license?  Seems hard to believe?  This shortfall might be a bit hard to catch, although if you have a writer in the top 5 it does seem like something you should know and act on if you’re getting stiffed.

Or are the services paying under the voluntary licenses and just stiffing every songwriter who is outside of a voluntary license?  And are they doing so retroactively for songs delivered prior to April 2016?

Now that the SX Works NOI look up is available, it really brings home the absurdity of the mass NOIs.  Not to mention the absurdity of the fact that no one in Congress does anything to stop it and that Big Tech has bootstrapped this absurdity into the Music Modernization Act.